KQ seeks Sh154b to aid liquidity, spur growth
Kenya Airways (KQ) is actively pursuing a capital injection of $1 billion (Sh154.7 billion) from strategic investors to bolster the airline’s financial position and steer it clear of the economic headwinds it is currently facing.
Managing Director and CEO Allan Kilavuka said the funds will be used to settle the airline’s debts, procure new aircraft, construct a hotel and enhance the carrier’s training and technical facilities.
“We will do a roadshow starting next year. We are about to appoint a transaction advisor who will help us in this way. We hope to get $1 billion. Once we get this money, we will have to redeem our loans and then we will use it for expansion,” he said yesterday during a morning radio talk show.
He indicated that KQ will conduct targeted roadshows to engage specific, suitable investors, with efforts already underway. This includes the earlier discussions with Delta Airline by President William Ruto and his own visits to potential investors in the Middle East and China.
According to Kilavuka, KQ plans to invite external investors and potentially existing ones if they are interested in increasing their stake. However, he emphasised that the main goal of this initiative that he referred to as “Kifaru 2,” is to inject fresh capital into the airline’s operations.
“By September 2024, what we hope is that we will have an idea of who this person or people are because they could be a consortium and hopefully complete the exercise next year,” Kilavuka said.
He stated that recapitalising the business, and carrying out a controlled expansion programme would prevent the airline falling into a debt trap akin to the Mawingu Project. In 2011, KQ launched Project Mawingu, a 10-year plan to expand its fleet and routes. Despite initial success, the project led to financial instability.
Financial challenges
Today, KQ’s financial challenges are still linked to this project. As of September 31, 2023, the airline’s debts were reported to be $1.3 billion equivalent to Sh196.4 billion.
“You don’t want to overheat. We have a plan for the next five years. Today, we fly to about 45 destinations. In the next five years, we will have expanded to 80 destinations,” Kilavuka said, adding that KQ will focus on maximising its codeshare arrangements with international airlines rather than purchasing aircraft that may not be needed in the future or opening numerous routes.
KQ experiences substantial expenses due to flight disruptions. Additionally, numerous airlines have their crews stay in Nairobi during layovers. The airline also welcomes individuals from outside Kenya at its training facility. The planned hotel is expected to generate hospitality revenue by accommodating these guests.
The airline also plans to expand its training facilities to offer a broader range of courses. This expansion is anticipated to be a profitable venture that will simultaneously support the airline’s operations. These initiatives are integral to KQ’s five-year expansion project
